Op-Ed Friday: Halloween's Coming, And Buyers Are Spooked

The lack of buyer confidence to enter the market has been the one principal reason in holding back home sales. Many would-be buyers are spooked of a possible home price decline. And the media is fueling that fear.

Feel like feeding the flames of fear, or throwing a wet blanket? We welcome your links, stories, thoughts, and ideas.

As an official NAR member, I feel that I simply must support our clueless… umm, fearless leaders and add to their comments.

It is true that the media is influencing the wild eyed emotions of pride, greed and complete lack of accountability that have led us to this pinnacle of home “ownership” that we currently enjoy.

This bucket of cold water reality must not be allowed to spread unchecked!

I trumpet the call of L.Y. and boldly proclaim that if you do not ignore all those pesky statistics, facts, trends and graphs… and buy something RIGHT NOW, you’ll probably be forced to pay less… perhaps much less… later on.

You could even watch in horror as your pile of sticks & bricks (ie: American Dream) drops months after month, without you enjoying all the benefits of being locked in to that premium price.

Why is that a problem, you ask?

Simply because the “pride of ownership” in our society dictates that the more you pay for something, the more pride you are entitled to feel.

How embarassing for you to go to a neighborhood block party or HOA meeting to socialize a couple years from now, and as the others boast of the $ 450,000 home they reside in, you are forced to shamefully admit that you were only able to pay $ 275,000 for the same model.

Oh sure, you got extra features & upgrades… but those will provide precious little comfort to your bruised ego when the other people sigh in pity for you.

How much more your shame if they offer to take up a collection to help out someone like you who obviously could not “afford” to pay the true value for your “biggest investment” and greatest asset.

Sad, indeed.

Well friends, I am here to offer the very hope that the media and blogs are trying so desperately to steal from you!

Don’t allow yourselves to be stuck in the lowest price house on the block.
Size, structure, lot location and upgrades will never overcome the stigma of of the low prices to come.

You’ve worked too hard on your image and you DESERVE to be one of the few to lock in at the current, high prices.

In days to come, the people who pay only half of original prices for a home might even find a welfare application taped to their front door from an anonymous neighbor who sympathizes with your plight.

PS: If you wait too long, you’ll probably be forced to pay less in property taxes as well, which will lead to feelings of guilt as you realize that you are not paying an equal share of those pretty new streets you are driving on.

PPS: Remember, if you don’t act now, you might find yourself with saved cash in the bank when you finally DO make the decision to leave the ranks of “second class renting citizens.”

If this happens to you, you will be forced to admit that you bought your low priced house with what was, in the past, referred to as a “down payment.”

This will display your complete lack of sophistication and identify you as an “old school” thinker, unable to lead on the cutting edge of the “new paradigm.”

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of course, I’m just kiddin’!
have a great day! 🙂

Stop for minute and go figure…I am actually buying a home this month…You ask why? I want a larger place.. Am I getting a good deal? I think so but won’t know for years to come I suppose. I am hoping thta by purchasing 25% below value that in two years time I will still be ok with some slight upgrades. So while everyone is hiding under a rock…

twoblockedOctober 19, 2007

aaaaudio,

No, you didn’t purchase 25% below value, you purchased AT current value. Your purchase price just reset the comps for your neighborhood.

Sorry, no instant equity for you. The next buyer will reset the comps even lower.

Asset HunterOctober 19, 2007

aaaaudio ~

No attack or offense intended.

I simply offered a (hopefully) comedic bunch of comments in response to Mr. Yun’s ideas in the post.

Consider that whether your purchase is a “good deal” or not might be subjective to your interests, and completely detached from whatever the true “market value” of the property is at any given time.

A $3 Circle K watch at full retail price for someone who’s going out boating… and a $ 2,000 discount on the new $ 10K Rolex they want and can afford… might both be great deals to the same person.

I think most agree that most houses are going to drop, and probably drop big. (not accounting for inflation or hyper-inflation)

Hopefully I speak for all housingdoom readers in that if you need a bigger place, want a bigger place and/or can pay for a bigger place… then all the best in that bigger place!

I don’t think anyone is “hiding under a rock.”
We just don’t want any big rocks to fall on our heads if we don’t need / want to buy now.

Either way… enjoy the new home!!
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
(Sometimes I do fall into the trap of knowing more about the PRICE of something than I know about its VALUE.)

Asset Hunter,
I appreciate your humor. It did make me laugh. I say hiding under a rock because people are sitting on the sidelines waiting for everyone else to make a move. I know what people are paying for houses on a daily basis. I have access to MLS and county records. I am a mortgage broker inside a realestate office and know what is happening in the market.
Twoblocked,
this is a short sale. Short sales are not included in most appraisals. Since I see what people have paid in the past five years for these homes I have a pretty good idea that homes on average appreciate 4-6% a year. So, there IS instant equity here in this transaction. How shallow of a statement is that? Without knowing the particulars of a transaction? I know last month a model match sold for 120k and 145k more more and the builder is still that high as well with their current year end specials. Either way it wasn’t a equity move, it was a big family move trying to protect myself from the falling rocks. Real estate is a long term investment anyways. Instant equity is for those flipping homes. My appraiser stated he had a hard time bracking this value. There was only one home that had sold this low and was 1000 sq ft smaller. There are deals out there. The lowest current rents in this area match my mortgage payment. To me that is all an investor/homeowner can hope for.

venetiancafeOctober 20, 2007

Oh yes, people are scared by the media. What a moron.

They NEVER mention that prices went up about 97% during 2004-2005 in Phoenix and much of Arizona. Prices for ugly McMansions in Scottsdale went up much more!!! Tacky condo conversions went up about 80% in 10 months in North Scottsdale.

Yes, it’s the media scaring them.

DCBeaconOctober 20, 2007

Nice post, Asset Hunter!

I generally agree that there may be reasons why folks can’t wait to sell or buy a home when the market is correcting, but let’s not make up stories to justify it, aaaaudio. My wife and I don’t have compelling reasons to move from our 1BR rental right now, so we can wait, and you’d be financially better off if you could as well.

Our current outlook in the DC area is that prices have already fallen 15% or more from their peak, they will fall an additional 20% by May 2008, and this is all a straightforward correction from the speculative run-up of prices that most of the country experienced.

If we have a recession or depression there is no telling how far prices might fall, but we’re not going to speculate on that until it happens.

Ours is not the behavior of people waiting on the sidelines with their hands in their pockets, being afraid of their own shadow. We are acting from research, analysis and decision-making based on our particular criteria and circumstances. Sort of like we’re all supposed to do with any major decision in our lives.

Yes, we are “old school.” So then…is “old school” the same thing as “not drinking the kool-aid, especially after it’s been sitting out for a few years?”

Like you, I and my family have no compelling reason to buy, however I can think of reasons that others may be in different situations than myself.

I think the biggest questions for purchasing a home are, “Is this house affordable for us?” [And by that I mean not only being able to pay the mortgage, but having money to save, invest, and live on while you are at it.] “Is this someplace I will be long term?” “Can I absorb the risk if the market turns down?”

If someone can answer yes to those questions, and this is how they want to spend their money, then I hope they enjoy their new home.

For myself, I can get a much better deal renting than buying, and I have a rental that meets my needs. If I couldn’t find a suitable rental, I might have a different view.

Staying out of the market because you are chicken, or jumping in because you are overly optimistic is a big mistake. However, as long as people do their due diligence and are making responsible financial decisions, I won’t fault them for buying, or not.

DCbeacon,
if yo speculate prices will fall another 20% why not just put in an offer for 20% below researched value. Do you think values will revert back to 1980? 1995? 2002? Don’t you think if you take a value from 1999 and add 4-5% appreciation annually you would be paying a afir price? I do and I am buying a little below that value.

MikeCOctober 20, 2007

>>The lack of buyer confidence to enter the >>market has been the one principal reason in >>holding back home sales

Don’t you just love the way Yun is phrasing it to be *ALL* the buyer’s fault?
Why, if they only had more confidence, those moronic buyers wouldn’t have put us in this situation in the first place!

Those buyers should just grow a spine, over-inflate their income on a liar-loan, and shut up for the next 40 years while they live hand-to-mouth in a home they cannot afford!

The nerve of those buyers! Spineless cowards!

What Yun should have said is, “The continuation of sellers’ collective delusions has resulted in a stubborn refusal to lower prices to a level where people can actualy afford homes, and actually obtain loans for them.”

The day Yun comes out and tells the truth about homes being WAY overpriced, and simply unaffordable…I will be shocked.

Otherwise and until then, he may as well save everybody’s time from now on and write one-sentence press releases:
“It’s all the buyers’ fault!!!”

AAAAudio, if you really bought a house with a fixed rate mortgage at the same fully amortized payment as “the lowest current rents in this area,” with a normal rather than an extra large downpayment, congrats, perhaps you really did find yourself a deal.

I don’t think anyone here would want anything else for you, in fact, most of us are just waiting for the same thing to become more common – and we’re well on our way.

DCBeaconOctober 20, 2007

Nice post, twist…I agree with you.

Aaaaudi, good question. We actually did make four different offers earlier this summer, but we found out we were too early to asccomplish what you suggest, so we decided to re-lease our place and wait awhile longer. Since then (July) we’ve continued to see prices dropping on comparable properties, and we may give things another try in November or December.

So we’re on the same page in theory. But I notice you’re in the business of real estate brokerage, and therefore have an incentive to persuade folks to come into the market now, sort of like the NRA. Forgive me if I question whether or not you have no agenda or even unconscious rationale for your point of view. Maybe it’s just all of the kool-aid I’ve noticed folks drinking over the past couple of years.

Hey, when buying costs no more than renting, people should do it again! I don’t think even the REIC kool-aid mixers would find much fight on this point.

The trick is that most of your REIC types consistently and deliberately underestimate the costs of ownership to try and get people into the market and make their commissions – you need to do the math, honestly, and when it works, it works, but do not rely on anyone who makes a commission to help you with that math.

Asset HunterOctober 20, 2007

Thanks, DCBeacon! It was fun to write! 🙂

JimAtLaw ~

Amen! That is one of the reasons I procrastinate taking my cars in for even simple service like oil changes and brake pads.

If I had any trust in the mechanic telling me the truth, it would be a bit easier.

When you go in for an oil change, and the guy comes out and spins a scary story of you ending up dead along a deserted blacktop because your air filter might be too dirty… every 3000 miles… it just gets annoying.

Not quite as annoying, though, as hearing about some great RE “investment” deal… asking the person “WHY” they feel it’s a great investment…
and then getting a bunch of drivel about “appreciation” in response.

This is after 10 minutes of explaining that I only buy for cash flow… NEVER for future value or “possible” increase of rents. It’s just annoying and wastes a lot of time.

Again I say to your comments… Amen!
It’s just so easy if you list ALL of the costs on a sheet of paper and simply add them up!!

All great points. I guess I am just trying to say that there are some real deals if you look in the right place. I am a mortgage broker yes but I am in the same boat as you folks. I have been trying to find a good deal for years now and I guess I am just excited to say I found the deal I was looking for in the area we really wanted. It is not a comp,ete;ly trun key home but I don’t mind painting and cleaning carpet for a 120k off the McMansion. 🙂

toysarefunOctober 21, 2007

If you are a careful prepared home shopper anytime over the next few years should be a good time to buy. It costs me about twice as much a year to own vs. rent. Then again, after factoring in the equity I gain every year who knows.
Anything cheap is always bought up pretty quick I’ve noticed. Then again, I’ve seen these cheaper buys turn over several times get over valued and wind up being put back on the market where they sit like the rest.

I don’t really think the bankers, brokers, RE agents, and builders even care about what a home used to be.

I think they are just freeloading off a system that they have manipulated in their favor.

Buyers should be spooked, affordability is hard to come by.

bigcityloansOctober 23, 2007

> My brother-in-law recently closed on a DR Horton home in a Myrtle Beach, SC golf course community for $163K … the sticker price was $214K. A deal … probably not … the last closing in the community was May of last year. However … his neighbors that are selling have their homes for sale in the low $200s and are still cutting their grass and will be for a long time to come.
>
> Here are some Long Island, NY stats …
>
> $1,650,000. list price $1,075,000. sold price
>
> $ 615,000. list price $ 466,500. sold price
>
> $ 625,000. list price $ 495,000. sold price
>
> Motto of the data … buyers do not be afraid to make offers on as many homes as it takes to purchase the home you want at the price that you are willing to pay. There is no up side to this market … so … those sellers who want to and who are able to sell at your price will sell to you after all you are most likely the only bidder on their home. Just as the sellers who sold here have “gotten it” and moved on with their lives.